Newmont Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 22, 2024

There are 11 speakers on the call.

Operator

morning, and welcome to Newmont's 4th Quarter 2023 Earnings 2024 Guidance Call. All participants will be in listen only mode. Please note this event is being recorded.

Speaker 1

I would now like to turn

Operator

the conference over to Tom Palmer, President and Chief Executive Officer. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining our call today. Please note our cautionary statement and refer to our SEC filings, which can be found on our website. Today, I'm joined by my executive leadership team, including Natasha Bouliun and Karen Obermann, and we'll all be available to answer your questions at the end of the call. I'd also like to take a moment to acknowledge our friend and colleague, Rob Atkinson.

Speaker 1

Our Chief Operating Officer for the past 5 years, Rob will leave Newmont in early May, although his legacy will endure. Through his visible self leadership, Rob has driven our fatality risk management program, achieving 5 years fatality free performance. Throughout the pandemic, Rob navigated our operations through challenges, including periods of care and maintenance, border closures and vaccine implementation. Rob also represented the very best of our values when he guided Penasquito through 2 major challenges, resolving a community blockade in 2019 and an unjustified strike last year. In both situations, Rob found sustainable solutions that protected the long term value of Deermont.

Speaker 1

Over the last 5 months, Rob and Natasha have conducted a thorough handover of accountabilities. Her role will remain with us to support Natasha and me before finishing up and heading back to the U. K. To spend more time with family. Before we get started, it is with great sadness that I shared the tragic news regarding a fatal incident at our recently acquired Brucejack operation on December 20 last year.

Speaker 1

I'd like to take a moment to remember our colleague, Adam Kennedy. Adam was only 44 years old. He was a partner, a son, a brother, an uncork, a best friend and a valued colleague. Our condolences go out to Adam's loved ones during this difficult time. And we are again reminded how important it is to maintain a sense of chronic unease when it comes to the safety of everyone who works at Gmod.

Speaker 1

Any fatality is totally unacceptable. We fully understand the fatality risks in our industry and the critical controls that need to be in place at all times to manage them. So we have been taking the time to conduct a safety reset across all Newmont sites, not just the 5 new Newmont operations. With a laser focus on the implementation of our fatality risk management system. This recent work includes training delivered by our line leaders, our manager directors, our general managers and our senior health and safety leaders, training on our fatality risk management standards and our critical control verification process.

Speaker 1

We're also concluding our thorough investigation into this tragic incident, which is being led by Dave Thornton, the Managing Director of our Africa Business Unit. We are applying the lessons learned from this investigation at all of our managed operations globally, and we will share them widely with our mining industry peers. Nothing is more important than our commitment to the health and safety of our workforce, and we are determined to create an environment that every person working at Viewmont across all locations returns home safe and well to their families and loved ones at the end of each and every shift. Turning to our performance in 2023. Gimont finished the year with a solid 4th quarter, putting us in line with the revised standalone outlook that we issued following the resolution of the strike at Penasquito.

Speaker 1

In summary, we produced 5,500,000 ounces of gold at all in sustaining costs of $14.44 an ounce. In addition to gold, we produced nearly 900,000 gold equivalent ounces from copper, silver, lead and zinc over the course of the year. This performance enabled us to deliver $4,200,000,000 in adjusted EBITDA, return on the $1,400,000 to shareholders and end the year with liquidity above $6,000,000,000 In a few minutes, Natasha and I will expand on how we expect to improve upon this performance in 2024 and beyond with a focus on delivering meaningful value to our shareholders. But before we do that, I would like to describe how we are transforming our business into a unique collection of the world's best gold and copper operations and projects following last year's transaction. When we announced our binding agreement to acquire Newcrest in May last year, we outlined a powerful value proposition built around 4 key commitments.

Speaker 1

1st, to set the new sustainability standard and strengthen Newmont's position as the gold sectors recognized sustainability leader. 2nd, to create the industry's strongest portfolio of world class gold and copper assets in the most favorable mining jurisdictions. 3rd, to deliver $500,000,000 of annual synergies and realize over $2,000,000,000 in cash from portfolio optimization. And finally, to continue driving a disciplined balanced approach to capital allocation. After closing the transaction on November 6 last year, the integration of the 5 new operations into our Imon operating model has been progressing very well.

Speaker 1

And as we enter this critically important year of integration and transformation, I'll be holding myself and my executive leadership team accountable for delivering on these commitments. And this will be our key focus in 2024. To support this work, earlier today, we announced 4 key actions that together will enhance our ability to deliver on our clear and consistent strategy. First, we plan to divest 6 high quality but non core assets this year. From this point forward, our world class portfolio will consist entirely of Tier 1 and emerging Tier 1 operations and districts.

Speaker 1

And it will have a significant exposure to growth in copper and gold from our industry leading organic project pipeline. 2nd, we provided our 2024 and 5 year outlook, giving a clear picture of the work we're doing today to expand margins and appropriately sequence our projects to deliver sustainable value. 3rd, with the clarity, simplicity and focus that our Tier 1 portfolio provides, we have committed to deliver a further $500,000,000 in cost and productivity improvements across the entire portfolio. And these improvements are over and above our synergy commitment for the Newcrest acquisition. We expect to hit this $500,000,000 annual run rate of improvement by the end of 2025.

Speaker 1

And finally, we announced a balanced shareholder return framework, consisting of a $1 per share annualized base dividend and a new $1,000,000,000 share repurchase program. Our go forward Newmont portfolio is focused on Tier 1 gold and copper operations and projects located in the world's most favorable mining jurisdictions. And it has 4 key features. 1st, it contains 10 Tier 1 operations, representing more than half of the world's Tier 1 gold mines in the Newmont portfolio. 2nd, it has 3 emerging Tier 1 operations that each has a clear path for growth.

Speaker 1

And we have the opportunity to create a Tier 1 district in British Columbia, a district in which Newmont will be operating for at least the next century. And third, it has an unmatched organic development pipeline with 6 large scale copper gold projects. And 4th, underpinning our Tier 1 portfolio is the industry's most robust foundation of reserves and resources. Going forward, Guimont has the industry's largest gold resource base and we also have the largest base of copper resources in the gold industry. To put these numbers into perspective, Dumont has an almost 30% larger gold reserve resource base than our nearest peer.

Speaker 1

And we have a 40% larger copper reserve resource base than our nearest gold peer. No other gold producer in the world can offer the depth and quality that Newmont's Tier 1 portfolio can today. Later on, I'll provide a little bit more color about Newmont's longer term outlook and the exciting gold and copper opportunities ahead of us. But first, I'd like to step back and give some insight into how we are framing the year ahead. 2023 brought with it a number of unique challenges, which are now firmly behind us.

Speaker 1

120 day labor dispute at Penasquito, asset integrity issues that were inherent in the original design of equipment at Harpo and wildfires in Canada impacting Eleonore. Those three events meant that our final production number did not reflect the full capability of our assets. As we emerge on the other side of these events, I am proud of the decisions that we took to protect the long term interest of our company rather than looking to seek short term experience solutions. However, I'm also not happy with the underlying level of our operating performance. We have the opportunity to improve our compliance to mine plans, to improve our fixed and mobile equipment reliability and to improve our mill triples and recoveries.

Speaker 1

So our focus for 2024 will be on safely integrating new teams, new operations into our Newmont operating model and culture, transforming our portfolio and laying the groundwork for sustainable operating performance, margin expansion and strong returns. Finally, this morning, we also announced that we have extended the completion date and increased the projected capital cost for our Catamite II expansion project. In the second half of last year, we completed the concrete lining of the top half of 700 meters of this 1.5 kilometer deep production shaft. This milestone gave us the opportunity to assess the condition of the known over break and ground conditions at the very bottom of the shaft, as well as incorporate the lessons learned from lining the top half of the shaft into the cost and schedule for the run home. We have critically assessed a number of options to safely address the known over break and line the lower section of the shaft.

Speaker 1

This work included key third party reviews before we landed on a method. And it was this methodology and subsequent decision that has informed the cost and schedule update we provided today. Although I'm not happy with the extension of time and cost, I am confident that we have chosen a method that is safe and will ensure the shaft construction is of the quality necessary to reliably service Tanami's prolific ore body for many, many years to come. So with that, I'll hand it over to Natasha to walk you through our operational priorities for 2024 and what we are doing to ensure that we deliver on our commitments this year. Over to you, Natasha.

Speaker 2

Thank you, Tom, and good morning. Since joining Newmont in October, I have visited 14 of Newmont's 17 managed operations. And I've been really impressed by the quality of the assets, the dedication of our people and the commitment from our operational leaders to drive safe and profitable production. Now before I begin, I'd like to provide a brief introduction to the operational team focused on integration and value delivery in 2024. As mentioned last quarter, within our global operating model, we have 6 regional business units, each headed up by a world class experienced Newmont leader, who you can see on this slide.

Speaker 2

This scalable integrated operating model enables alignment across our operating leadership team, while also empowering our managing directors to apply the extensive local and technical knowledge and draw on the global functional expertise to lead each unique operation. To support our operations from the project execution side, we have a dedicated restructured project delivery team. This team of subject matter experts is working across the full spectrum of our organic pipeline, including studies, project development, construction and commissioning of projects. They strengthened our operating model with block guiding capability and an understanding of industry leading practices in project development. This year, we will have a laser focus on the performance of our 11 managed operations in our go forward portfolio, while also guiding our 6 non core assets through a safe and productive process for divestment.

Speaker 2

As we work to deliver efficiency and reliability from our global portfolio, we are committed to progressing our 4 key projects in execution keeping them on track in 2024. As a result, we are entering the year with a strong focus on integration and the safe delivery of our targets. Our success in 2024 will be largely determined by the performance of our 6 managed Tier 1 operations: Boddington, Tanami, Penasquito, Ohafo, Lihue and Cadia. Not underestimating the significant impact of the delivery from the full portfolio of operating assets. I will also separately touch on Telfer and how we are ensuring tailings dam integrity at this new to Newmont operation.

Speaker 2

We are very clear on the key priorities to integrate and deliver 2024 and how to set up operations for the next 5 years. And I will touch on some of these at each of the Tier 1 managed operations. At Boddington, we are progressing the stripping of the current laybacks in the north and south bits as planned with improved productivity from our fully autonomous all its fleet. At our polymetallic mine, Penasquito, our focus is on delivering strong silver, lead and zinc from the Chile Cola oreo pit and continuing white stripping in the Penasco pit to deliver higher gold grade in 2025. At our half hour, we remain on track to replace the defective growth here in the Q2 to maximize processing rates.

Speaker 2

At Tanami, we are improving material movement through the decline as we progress deeper underground. The LNG team will be focused on simplifying the mine plan and improving asset reliability. And at our other New to Newmont operation, Cadia, we are commissioning the next block cave and progressing some important tailings set up for the next decade of oil feed. We have full potential teams on the ground at Cahir in Cadia actively working through our diagnosis phase and designing the initiatives to extract value and deliver the opportunities identified. So taking these key priorities into account, we anticipate that the production will be around 50 3% weighted towards the second half of the year.

Speaker 2

As we return to full processing rates at Ahafo, reach higher grades from the Liberator ore body at Tanami and safely integrate the new to Nuance sites into the Nuance operating model. I'm touching briefly on Talfa, a non core operation in Australia. We are focused on remediating sinkholes and cracks detected at the tailing storage facility in December, when we stopped the mill to complete the first phase of remediation work. In early February, we temporarily restarted the plant, whilst evaluating options for further remediation of an adjacent tailings facility, and we'll provide an update on that work on our Q1 earnings call. And with the focus on fatality risk management, respect at work and full potential in place, we remain firmly on track to deliver on our commitments this year.

Speaker 2

On top of delivering in 2024 operationally, we are working to bring forward new low cost ounces from the 4 key projects we have in execution. These projects include the 2nd expansion at Tanami, as Tom just covered. We are focusing on safely lining the lower section of the shaft and continuing to construct the crushing and conveying infrastructure underground. 2 Block Cave projects at Kalia to recover both gold and copper, where we have just delivered 1st ore as we ramp up the first of these caves. And our new mine, Ajaro North, where we are making good progress on the construction of the mill and other supporting infrastructure, along with growth stripping to allow us to start accessing the ore for stockpiling.

Speaker 2

When this new and a very exciting mine is combined with the underground potential of Subika, Abenso and Naguanso, we have a Tier 1 Harford District that will be capable of producing around 850,000 ounces of gold per year out to and beyond 2,050, which would make it one of the world's top gold mining districts by any measure. Now bringing all of this together, as we focus on integration and site delivery this year, we expect our Tier 1 portfolio to produce around 5,600,000 ounces of gold and an all in sustaining cost of $1300 per ounce, combined with a very significant 1,900,000 gold equivalent ounces from copper, silver, lead, zinc and polypidem. Our unit costs are expected to improve compared to 2023 due to steady production volumes and the delivery of synergies and full potential improvements, with the lowest unit cost coming from Newmont's managed Tier 1 portfolio. Our capital reinvestments remains in line with the pre acquisition spending levels as we continue to focus our disciplined delivery and a balanced approach to capital allocation. And with this stable production and structured reinvestment, we are strongly positioned to integrate and deliver on our commitments in 2024, setting the stage to future proof these world class assets with benchmark performance and meaningful growth in 2025 and beyond.

Speaker 2

And with that, I'll turn it back to Tom.

Speaker 1

Thanks, Natasha. Building off the foundation we are establishing in 2024 that Natasha just covered, I'd now like to provide a bit of color around the opportunities that we are seeing from our go forward portfolio. We will continue to optimize the performance of our mature Tier 1 operations and our new to Newmont assets. At Boddington, the stripping that we are doing today will bring forward strong gold and copper grades starting in 2026, all supported by the gold industry's only fully autonomous haul fleet. At Panamite, the completion of the second expansion will provide efficient access to ore at depth and open up this prolific underground ore body in 2027 beyond.

Speaker 1

At Penasquito, the stripping that we are currently doing will bring forward a higher proportion of gold ounces from the Penasquito pit, balancing with the strong production of silver, lead and zinc from the Chile, Colorado pit. At Ahafo, we are building out district potential with new low cost ounces from both underground and open pit at Ahafo South and our new mine, Ahafo North coming online in 2025. At Cadia, we will commission our 2nd Block Cave in this timeframe, bringing forward high gold copper grades, whilst in parallel, leveraging our full potential program to improve the reliability and throughput. And finally, simplifying the mine plan is expected to deliver a strong improvement in gold production as we reach high grades from Phase 14A. As I mentioned earlier, with a clear line of sight into the Tier 1 managed operations in our portfolio, we have identified $500,000,000 of additional cost and productivity improvements over and above our synergy commitments.

Speaker 1

So taking everything into account, over the next 5 years, we expect to deliver growing gold production driven by the completion of the laybacks at both Boddington and Penasquito, the new ounces from Ahafo North, the completion of the second expansion at Tanami and both Bock K's Acadia and mining improvements combined with higher grades at Tahira. And on top of this improving gold production, GEMA will produce a significant amount of copper along with silver, lead, zinc and allyltholomew for that global diversified Tier 1 portfolio. Driven by this high metal production and with a focus on improving costs, we expect to deliver lower all in sustaining costs, bringing our go forward portfolio down to $11.50 per ounce on 20.27. For development capital, we are applying a pragmatic and methodical approach to our project work to ensure we are efficiently bringing forward opportunities that are aligned with our strategy, but also remaining disciplined with our capital allocation priorities. We expect to spend an average of 1 point $3,000,000,000 per year on development capital, driving healthy competition for investment as we close out 4 large projects we have in execution and bring forward the next wave of profitable production from our organic project pipeline.

Speaker 1

Dimwood is supported by the deepest and best project pipeline in the gold industry, and we will manage it with discipline and rigor to ensure that the most value accretive opportunities are advanced at the right time and in the right order. We have 3 world class copper gold projects in our pipeline ramped up behind the 4 projects we have currently in execution. Moving underground at the block cave at Red Chris, developing the block cave and processing the sulfide ore at Yanacocha. And then when we look beyond those projects, we have 3 exciting long term opportunities to further diversify into copper, Galore Creek, De La Union and North Aviator. Over the next 10 years, demand for copper is expected to increase significantly.

Speaker 1

And based on current copper production trends, the world can expect to experience around a 10,000,000 ton shortfall of this critical metal by 2,035. Bridging this gap will require significantly more copper mines, copper recycling and enhanced copper leaching processes, creating an exciting opportunity for Newmont to help meet this demand with the organic copper exposure we have in our portfolio, whilst continuing to provide unparalleled exposure to gold and its enduring value. And with that, I'll hand it over to Karen to talk through our balanced capital allocation strategy.

Speaker 3

Thank you, Simon. Our capital allocation strategy is underpinned by 3 priorities. Working in unison, these priorities maintain the financial flexibility necessary to reinvest in our business with the goal of generating long term sustainable free cash flow, in turn positioning us to return capital to shareholders through our balanced shareholder return framework. Beginning with financial flexibility, the first of our three priorities. We intend to maintain the investment grade balance sheet with gross debt of up to $8,000,000,000 and liquidity of $7,000,000,000 including approximately $3,000,000,000 of cash.

Speaker 3

And by maintaining a strong balance sheet, we can ensure we have the ability to steadily fund cash generative capital projects all while returning capital to shareholders. As announced this morning, we have 6 assets currently classified as non core. The anticipated proceeds from lease divestments along with free cash flow from operations will cycle through our capital allocation priorities beginning with enhancing our financial strength and flexibility. Divestiture proceeds will first be allocated to maintaining our minimum cash balance of approximately $3,000,000,000 and will then be applied to reducing debt to $8,000,000,000 or below. Our initial debt target of $8,000,000,000 is achieved, we return we intend to return both free cash flow from operations and divestiture proceeds to our shareholders, which I'll touch on in more detail in a minute.

Speaker 3

Moving to sustainable investments. As Tom and Natasha mentioned, over the next 5 years, we expect meaningful production growth from our long life, low cost operations as we invest an average of $1,300,000,000 of development capital into projects that will generate the highest returns. The 3rd priority of our capital allocation approach is a balanced shareholder return framework, designed to return capital to shareholders through our base dividend and share repurchases. To be clear, we are not yet where we want to be in terms of generating free cash flow to return to our shareholders, but believe we have the right framework in place to return an increasing amount of capital as our operational and financial performance improves. Our balanced shareholder return framework begins with an annualized base dividend of $1 per share, an amount that will remain fixed and currently equates to a quarterly dividend of $0.25 per share.

Speaker 3

We expect to be able to pay the base dividend from free cash flow over time. Our dividend is subject to approval from our Board of Directors

Speaker 1

on a quarterly basis. Historically,

Speaker 3

our free cash flow generation has been weighted towards the back end of the year, and we expect that will be the case in 2024 as our production profile and synergy realization is expected to be higher in the second half of the year than in the first half of the year.

Speaker 2

In addition, free cash flow generation

Speaker 3

in the Q1 of 2024 will be impacted by the payment of a stamp duty tax related to the acquisition of Newcrest. The stamp duty was accrued in the 4th quarter and paid in February. As necessary, we will use the flexibility of our balance sheet from the base dividend through the quarters with the annualized $1 per share dividend expected to be ultimately funded with free cash flow. Additionally, our Board has authorized $1,000,000,000 share repurchase program. As the liquidity and debt parameters I defined earlier are satisfied, we intend to repurchase shares in line with our free cash flow and asset sale proceeds.

Speaker 3

To reiterate, our free cash flow and proceeds from divestments will be prioritized as follows. The first dollar will be allocated to maintaining our minimum cash balance. The second will be applied to reducing debt to $8,000,000,000 and the third will go towards share repurchases. Our go forward portfolio positions us to improve margins and performance over time, funding our capital allocation priorities and allowing us to reward our shareholders directly with returns of capital. And we believe reducing debt and returning capital to shareholders creates an attractive value proposition for new and existing investors, while also improving the company's financial position over the long term.

Speaker 3

I'll now turn it back to Tom for closing remarks.

Speaker 1

Thanks, Karen. Newmont's go forward Tier 1 portfolio sets the new standard for gold and copper mining and provides our shareholders with exposure to the highest concentration of Q1 assets in the sector, located in the most favorable mining jurisdictions and with an improving cost profile to maximize margins and generate strong free cash flow. Industry leading growth optionality in copper and gold through disciplined reinvestment and project execution and a balanced shareholder return framework. As we look forward to this very important year of integration transformation, I am very confident in the quality of our assets and the capability of our team to deliver on our commitments and justify our position as the benchmark gold equity. This year, we'll also be continuing to work on transforming our go forward portfolio and importantly, building out the strategic and life of mine plans for each of our managed operations.

Speaker 1

And I look forward to updating you on the longer term potential of this world class portfolio at our Capital Market Day in the second half of this year. And with that, I'll turn it over to the operator to open the line for questions.

Operator

Thank you. We will now begin the question and answer session. We ask that you please limit inquiries to one primary question and one follow-up question. Our first question today is

Speaker 4

I guess I'll limit my question to just the single one. On the Newcrest reserve front, it looks like the overall totals for gold declined by about a third. And I understand the differences were primarily due to reporting changes under SEC guidelines. I'm wondering how we should be thinking about the prior reserves that were there and whether the company would expect to incorporate these as part of their reserve base in the future or if this is something different than that? Thank you.

Speaker 1

Yes. Thanks, Josh, and good morning. As we did the work to bring the Newcrest reserves and resources into the Newmont standards, we obviously have a tighter set of rules in terms of what makes a Newmont reserve and a Newmont resource. As the numbers came together, once we had full transparency into the reserves of resources, they were very consistent to what we assumed when we did our due diligence back in April May. There's a number of moving parts to it, Josh, and talking to the team over the last couple of days and reflecting back on what we did with Goldcorp 5 years ago.

Speaker 1

I think giving each of you the opportunity to sit down in a more detailed session where we can have our IR team along with Don Do, who governs that whole process. We can take you through some of those detailed questions and ensure that we're able to adequately answer where you might be seeing those differences. But we the work's done is we've obviously don't debate that statement. So I'd certainly look for our Investor Relations team to set those meetings up and we can spend some good time taking it through that if that's okay.

Speaker 4

Yes. All right. Thank

Speaker 1

you. Thanks, Josh.

Operator

Our next question today is from the line of Lawson Winder of Bank of America. Lawson, your line is now open. Please go ahead.

Speaker 5

Thank you very much, operator, and thank you all for

Operator

the update

Speaker 5

today. Could I ask about the capital return and how you thought about that? And essentially what it looks like you've done to me is you've shifted the capital from dividends to share buybacks. So what drove that decision to make that transfer of capital return?

Speaker 1

Thanks, Lawson. Good morning. I'll kick off and I'll get Karen to build. When you look at the transformed Newmont with the acquisition of Newcrest. So as we shaped the Newmont portfolio, that Tier 1 portfolio is very different from what Newmont was before.

Speaker 1

So once we determine that portfolio, then we step back to look at the appropriate capital allocation approach or strategy in the context of a portfolio of Tier 1 assets with very long life. We looked at our balance sheet in terms of the debt that we brought on board following the transaction. We looked at the number of shares that we issued when we do this transaction And they are important factors when you sit down and look at your capital allocation framework. So you step back from that. 1st and foremost, it's ensuring that we are putting money on the balance sheet.

Speaker 1

We're getting the cash to the parameters that Karen talked about, building that cash up in order to pay down debt to the targets we're going to. Really important step that we do there. We're really clear in terms of the amount of money we'll put towards reinvestment in the business, seeing that average of $1,300,000,000 And a $1 per share based dividend is something that is fixed and you put in the bank in terms of what you can expect from Newmont. So then it becomes what do we do with any dollar over and above having met those requirements the cash proceeds coming in and any net free cash flow that we generate in the context of us having reissued shares and a $1,000,000,000 share buyback gives us the vehicle to return any variable component or additional free cash flow. So, it was very much the context of looking at the portfolio that we have transformed to and where we want to take that portfolio to in terms of its capital allocation settings.

Speaker 1

Karen, do you want to build

Speaker 3

on that? Sure. Just a follow on to that. And then also, as we looked at this portfolio, it's linking the return of capital directly to our free cash flow realization. And then also just in terms of consistency in terms of where we were in 2023 for the absolute dollar amount of the dividend, the base dividend we paid at $1.60 was around $1,400,000,000 So our base dividend today going forward at the dollar with a new share count is around $1,200,000,000 We believe that's the right level for our free cash flow generation as we're going forward as we couple that with a variable portion of the return now that will be in the form of a share repurchase, I think, which is consistent with the new equity that we just issued and in terms of our ability to start to bring that down as well.

Operator

Our next question today is from the line of Anita Soni of CIBC. Anita, your line is open if you'd like to proceed.

Speaker 6

Hi, good morning, Tom, Karen and Natasha. So my first question is with respect to the metallurgical changes at Penasquito. Could you talk about that and what exactly happened there? What years does it impact? And I noticed there was a reduction in reserves at Penasquito on gold and silver, and I just want to seek more clarity on that.

Speaker 1

Good morning, Annette. I'll kick off and Daniel Dan Garing is also here with Natasha and Rob is one of the chip in folks. I think probably a couple of factors there. I think we've drilled some 40 kilometers of infill drilling across Penasquetta over the last period of time. And then looking at the impacts that may have in terms of reserves and resources.

Speaker 1

And there's a layback in the Penasquito cut back 10, that's scheduled out into the 2030s. But as we did that into drilling, didn't see the level of metal that we assumed as we got that greater density of drilling. And so you're seeing that reflected in terms of reserve and resource numbers. It doesn't mean that we can't get that laid back into the system. And our real focus at Penasquito is ensuring that we roll up our sleeves, tighten our focus and look to improve the operational efficiencies at that big mine.

Speaker 1

And I think there's still plenty of upside there. So I think about the timeframe out in front of us and the opportunities to improve cost of productivity in Penasquito, I can see pathways to bring those ounces back in again as we focus on that challenge with a good decade out in front of us. The second area, Anita, as we look at the block models and reconciliations over the last period of time, we'll see reconciliations for silver lead zinc sitting between 5% and 10% over, so 5% to 110%. Gold was coming in at around 90%, 95%. So as we updated our mine plans, we incorporated the reconciliations that we've been seeing within our block model, so you're seeing some of that effect flow drill as well.

Speaker 1

There's the governance of that block model we manage separately. It's governed separately from the development of the mine plans. So as we look at those reconciliations, we might be providing updates to the mine models.

Speaker 6

Okay. Thanks for that. And then my other question is also operational technical in nature. I'm not quite sure what under break and over break means. Can you just explain it in layman's terms what's happening at Tanami?

Speaker 6

I mean, my understanding, I think it looks like it looks there was an issue with when you were drilling the shaft and there was, I guess collapsed a little bit or is that a mistaken assumption? Like what's going on at

Speaker 1

Tanami? Yes, thanks, Anita. So maybe put that Tanami production shaft in a little bit of perspective, 1.5 kilometers deep and the over break, which is the predominant challenge we're working through, is at the very bottom of that shaft. So it's in the bottom couple of 100 meters. So you throw out we throw out a 1.5 kilometer deep shaft, it's 3 centimeters towers top to tail underground in middle of the Northern Territory.

Speaker 1

So it's at that very bottom of the shaft that we're seeing the over break. As we raise both the shaft, it's a 6 meter diameter shaft. As we raise both that shaft and you're leaving that parent drilled rock sitting there as you then come from the top and lying down at that very bottom of the shaft within some broken ground. So you do get some raveling and some ground breaking off into the very bottom of the shaft. And as that relaxed, that has broken out in areas to in some areas, double the diameter of that shaft at the very bottom.

Speaker 1

It's the nature of underground mining and shaft sinking that you'll hit pockets of ground that's got poor conditions. And so we've seen that what we call over break, which means the width of the shaft is wider than you can safely reach out to do rock faulting, shop creating and the like to be able to then put the lining on. So as we step through that 10 years ago, if you're doing that work, in the shafts industry, there would have been some very unsafe practices to be able to fill in that area in order to be able to bring back into 6 meter diameter and then line that shaft. We're not prepared to do that. So we first understood the level of over break and then developed a range of different methodologies for how we could safely rectify that, had them assessed by third parties and then landed on the one that we believe we could send human beings down at that depth to that location to do that work.

Speaker 1

So we have a methodology now that will involve safe rock bolting from the Galloway, safe shop creating from the Galloway and then we'll fill that bottom section of the shaft, that's couple of 100 meters with concrete and then we'll re raise that bottom section and then we'll come down and line that section alongside the rest of the shaft. We will have a shaft that will be assembled safely to the appropriate quality to then run for decades to service the fuel body at depth. So that's the process we've been through to determine how to appropriately fill the overbanked areas. So hopefully, Anita, that gives you some clarity.

Speaker 6

It does. That part is what I thought. That's typical when someone hears the word over break. It's the phrase under break that you also used, which I'm that's what confused me. I'm like, yes.

Speaker 2

Could you explain that for me?

Speaker 1

There's not a huge amount. There's not a huge part of that, but there are certain areas where the raised bore has moved past and it's hard rock or whatever it might be. And you've got a bit of material protruding into the diameter of where you want to line the shaft. So it's really coming through and that would be out of clean back break back to the 6 meter diameter. So you've got the appropriate dimension and tolerance to be able to then lay poor concrete to form the wall.

Speaker 1

So there are certain sections where you haven't been able to bring out the full 6 meter diameter. So you have to do some rectification work there.

Operator

Our next question today is from the line of Daniel Major of UBS. Daniel, your line is now open.

Speaker 7

Hi there and thanks for the questions. Questions around some of the Newcrest assets. Observing, I guess, from a distance this company for quite a long time, two things. The Lihir asset has been a perennial underperformer ever since Newcrest bought it. Why do you think you're going to be able to deliver better results and more consistent results that lie here than the new cast were able to over the last 10 years or so?

Speaker 1

Good morning, Daniel. It's probably morning to you, I suspect. The year is a big asset developed by Rio Tinto, Rio Tinto divestiture to the Leahir Gold Mining and then Newcrest, I picked it up 10 or a dozen years ago. A big mine like is best placed in a big Tier one portfolio where you can balance out the exit flows of a large complex mine. So first and foremost, you can in a balanced portfolio with 9 other Tier one operations, you can develop strategic life of mine plans to optimize the value and allow the ebb and flow of gold production that flows from that as you move through the mining cycle to be appropriately managed.

Speaker 1

That would be my first observation. My second observation is that it suffered from being a cash generating asset in the smaller portfolio. Therefore, there hasn't been the appropriate time and attention on equipment reliability by fixed and mobile. We're getting after that this year. There's also complexity in that mine plan that we believe can be simplified as we think about how we present the different types of ore and handle the material and have the materials handling of that ore through a complex processing plant and autoclave.

Speaker 1

We see real opportunities there as well. And one data point, Daniel, that I put out there for you, what swallow doesn't make a spring. But as we're in the 3 months that we've had in the DIMO portfolio, and we've worked with the team there, the dedication of our operator, our on the ground managing director to build a 2024 minute plan and budget that they can get after. But here, in the month of January, beat their plan for the first time in 4 years. And the cultural change and the morale that comes to be able to set a target to get after that feeds on itself, and we see a real opportunity to set for the year, so stretching the achievable targets for them to hit the marks and to get the confidence that I could do things because they fit a new portfolio and they were able to give it the support attention that it deserves.

Speaker 1

So hopefully that gives us some color for how we think about the year.

Speaker 7

That's very good. Thank you. And then the second question is slightly similar, again, for asset that some had lots of potential but not move forward, particularly is Wafi Golpu. How much money are you spending on it at the moment? And where, from a timing perspective, do you see it kind of fitting into the growth pipeline, particularly kind of referencing Slide 21 of your presentation where you've got your various longer term growth options?

Speaker 1

Yes. Thanks, Daniel. Wafi Golpu is one of the great untapped copper resources in the world in a very prolific ring of fire. It's a wonderful part of the world to be looking for and mining copper and gold. It's still in the study phase.

Speaker 1

So, there is not a significant amount of money being spent on that project. A lot of the focus is working with Harmony, our joint venture partners and the PNG government to work through the necessary negotiations to ensure that you ultimately have a investment regime that you can consider the level of investment over the timeframe you brought in that mine to be a secure financial framework. And so that's the main focus with what we've got to at the moment. It sits there alongside what kind of red, Chris, and the ability to build a pressure oxidation circuit at Yanacocha to process the sulfide ore is 3 grade copper gold projects. It's a great problem to have.

Speaker 1

It's an embarrassment of riches in terms of the projects that line up to complete the capital behind the 4 week projects we have in execution. So, what was the goal is going to be a really, really important mine to contribute to the world's need for copper over the next several decades. So but you need to have the appropriate investment environment. You think we'll need to go back in and do the appropriate level of drilling and study work to understand ultimately what the cost and returns will be. What the Golpu and Red Chris are both block cave mines.

Speaker 1

We've got that technology in our portfolio. We've got the capability in our portfolio. The blockade mines to invest all of the capital upfront before you get a return. So it's critically important you understand the ore body and you understand the development cost before you commit to execute. So that's going to be important part of both decrease and what the goal for Newmont as we make a decision about which projects follow Catamoy 2, a half of North and the 2 plot case at Canyon.

Speaker 7

All right. Thank you very much.

Speaker 1

Thanks, David.

Operator

Our next question today is from the line of Greg Barnes of TD Securities. Greg, your line is now open.

Speaker 8

Yes, thank you. Good morning, Tom and everybody. Just on the dividend, returning to that again, I understand obviously your base dividend and the share buyback program. But as you bring costs down and production up, do you see yourself transitioning to a dividend policy that's more progressive, I. E.

Speaker 8

You raise dividend year after year, which some of your peers have been more successful on this front, that's the approach they've taken. Is that where you see this going?

Speaker 1

Greg, I think about how to model Yvonne returns. I'd put a fixed $1 a share dividend in your model and just run it forward. Any additional cash that we generate over and once we set the parameters on cash and debt, we're likely that variable component is likely to come through share buybacks. Just been through a major transaction, we've increased our share count and we would look to bring that share count back down again. So for the foreseeable future, bank on a dollar a share dividend and any variable components of share buyback.

Operator

Our next question today is from the line of Carey MacRury of Canaccord. Carey, your line is now open. Please go ahead.

Speaker 9

Hi, good morning. Just a question on the balance sheet, the $5,000,000,000 net debt target. Are there debt metrics here specifically targeting the IMET?

Speaker 3

Yes. Essentially, we're going to our goal is always to have a financial investment grade rating that we currently have today. So that is the absolute goal. But yes, in terms of the main metric, looking at a one times net debt to EBITDA ratio as we go forward.

Speaker 9

That's helpful. And then maybe one other question, if I can. During the transaction, I was you guys talked about the potential in the Golden Triangle area, no plans set out here. But can you talk a little bit about how you see that or how that region evolves over the next few years?

Speaker 1

Yes. Thanks, Kerry. Just to be a little bit silent, I'm pretty sure I heard you say, how do we set the goal of trying to opening up over the next few years. That's just I mean, I've actually had a couple of trips up there sadly over the last couple of months. Real potential at Brucejack to get a really solid understanding of that ore body in life and to have Brucejack contributing nice cash for quite some time to come from a nice ore body and then the exploration potential around that Valley of the Kings area.

Speaker 1

So really nice gold opportunity there. As you then swing across to Red Chris, really important that spending some time in the coal shed at Red Crescent and getting to appreciate the size and quality of that ore body, it is going to be an amazing mine. So it's really going to be about ensuring that we work to understand how to build that mine to a high quality, understand the cost, understand the schedule, understand the various approvals covering that and develop that mine because that mine will run for decades with the original cave and then the other opportunities in around there. So that is going to be a real focus in terms of copper and that investment. And then we bridge off that up to Galore Creek and what we'll do with Keg to do off with Chris and up in the Galore Creek and then ultimately develop Laurel Creek as another great copper mine.

Speaker 1

So that it will be pretty good potential, the condition of underground at Red Chris really open up the decades of Red Chris and pivot off that into the Wall Creek. Natasha, do you want to do that, Bill?

Speaker 2

No, I think that's it. Thanks, Paul.

Speaker 1

Thanks, Carrie.

Operator

Gary. Our next question today is from the line of Tanya Jakusconek of Scotiabank. Tanya, your line is now open. Please go ahead.

Speaker 10

Great. Good morning, everyone, and thank you for taking my questions. Just wanted to come back to just a lot of information has come out today and I'm sort of looking out to what else is coming out above and beyond what you put out. Looks like at your Investor Day, you mentioned new life of mine plans. We've got some Acadia news, Block Acadia news coming out in second half of the year.

Speaker 10

Am I to assume that all of the reserves, Tom, are now done to your standard on these new crest assets, the life of mine plans are just going to be based on these new reserves? And will we get more information than just the chart that you've put out, the 2 charts on the 5 year production and cost for your Tier 1 assets? What are we getting beyond this impacting at this Investor Day, yes?

Speaker 1

Thanks, Natasha, and good morning. So the reserves and resources are set to demand standard. I'm looking across the road to Dondo and he's breathing a sigh of relief because he's had a significant lift from November 6 to a few weeks ago to get that through our processes. So they get they're the new month standard. And you're right, what we're doing now is doing the so Francois Hardy, who's the group head of our Mineral Resource Management Group, is now running strategic mine plans and life of mine plans on the top of those reserve resource statements to build out potential of that go forward portfolio on top of that 5 year outlook.

Speaker 1

We'll work that over the course of the months ahead. We've got an important strategy day with our board in June. Our annual strategy day is always in June, and we'll spend some time with our board looking at that longer term potential, debating that and understanding that to then build towards an event today in the second half. We will start to show you and share with you a picture beyond the 5 years. What we see is the potential for this Dumont upgraded portfolio over the next 5, 10, 15, 20 plus years.

Speaker 1

We're still debating the timeframe for that, but where the current thinking is we revert to our normal time frame, which is typically around that November time frame that we have at our Capital Markets Day and also talking about doing one in New York and one in Australia. So we pick up both sides of our markets. But that's the work in front of us this year is to really get after the strategic lifeline plan. So we give you that with confidence to give you that longer term story for this portfolio.

Speaker 10

Okay. So what I'm understanding from you is that we are going to get above and beyond just the 5 years that you've provided for us here. So we would have a visibility for maybe 10 year plus in your Investor Day?

Speaker 1

That's correct, Tanya.

Speaker 10

Okay. And then my second question, I just wanted to understand, I think, Tom, you mentioned that you're certain that your 6 operating assets are going to be sold, the non core one in 2024. Does that mean that we are going to be seeing your financials going forward as having discontinued assets from Q1 onward on all of these 6 assets?

Speaker 3

It's China. The expectation is at the end of the Q1 2024 that these 6 assets will be held as assets held for sale.

Speaker 10

Okay. All right. So then you're reporting on your operating assets and the other ones will change a little bit as we look at what you're reporting on production costs, etcetera?

Speaker 3

Correct.

Speaker 10

Okay. Thank you so much for taking my questions.

Speaker 1

Thanks, Tanya.

Operator

My apologies. This concludes the question and answer session. I would like to turn the comments back over to Tom Palmer for some closing remarks.

Speaker 1

Thanks, operator, and thank you all for your time and look forward to catching up with you soon. Thanks, everyone.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Newmont Q4 2023
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